Rebound Effects from Increased Efficiency in the Use of Energy by UK Households*

Patrizio Lecca, John Swales () and Karen Turner

No 1123, Working Papers from University of Strathclyde Business School, Department of Economics

Abstract: In this paper, we use CGE modelling techniques to identify the impact on energy use of an improvement in energy efficiency in the household sector. The main findings are that 1) when the price of energy is measured in natural units, the increase in efficiency yields only to a modification of tastes, changing as a result, the composition of household consumption; 2) when households internalize efficiency, the improvement in energy efficiency reduces the price of energy in efficiency units, providing a source of improved competitiveness as the nominal wage and the price level both fall; 3) the short-run rebound can be greater than the long run rebound if the household demand elasticity is the same for both time frames, however, the short run rebound is always lower than in the long-run if the demand for energy is relatively more elastic in the long-run; 4) the introduction of habit formation changes the composition of household consumption, modifying the magnitude of the household rebound only in the short-run. In this period, household and economy wide rebound are lowest for external habit formation and highest when consumers' preferences are defined using a conventional utility function.

Keywords: Energy efficiency; Rebound effects; Households energy consumption; CGE models. (search for similar items in EconPapers)
JEL-codes: C68 D57 D58 Q41 Q43 Q48 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2011-04
New Economics Papers: this item is included in nep-cmp and nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Rebound Effects from Increased Efficiency in the Use of Energy by UK Households (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:str:wpaper:1123

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